In advance of the March 21 Budget, the centre-Right think-tank has set out the measures it believes George Osborne should take to reduce the deficit.

The CPS says the UK is over-taxed and over-regulated. It is calling for the income tax personal allowance to be raised to £9,000 this year and £10,000 next year and for the main rate of corporation tax to be cut to 20% 2012/13 (from 25%) with the intention of further cuts in the years ahead.

This links in with a series of recommendations for business deregulation, which include the suspension of the minimum wage for workers aged under 21 working for small businesses and ‘no-fault’ dismissal for underperforming employees.

In addition, the CPS wants Winter Fuel Payments, free TV licences for the over-75s and free bus passes for pensioners to be means tested.

It also calls for the Department for International Development’s budget to be capped at 2010/11 levels.

Ryan Bourne, head of economic research at the CPS, said the complexities of the tax system discouraged success.

‘But in the long run the only way back to achieving economic prosperity is to embrace enterprise and to reward success. These modest steps start that journey.’

CPS director Tim Knox added: ‘We need lower, simpler taxes that encourage, not penalise, wealth creation. Lower corporate tax rates can quickly lead to an increase in tax receipts: between 1982 and 2010, the main corporate tax rate fell from 52% to 26% while receipts increased by 30%. The same is true of income tax… So if you want the rich to pay more, lower the tax rate.’